Available resources and the way they are spent influence students’ learning opportunities. To support equity and prevent school failure, countries should aim for equitable and effective resource allocation mechanisms. To this end, it is important that fair funding strategies:
• Provide sufficient resources to improve the quality of early childhood education and care (ECEC) and promote access, in particular for disadvantaged families.
• Take into consideration that the instructional costs of disadvantaged students may be higher. To respond to this need, formula funding seems to be the most efficient and transparent method of funding schools incorporating needs criteria. Other options include designing specific funding programmes at the system level, although these can represent an additional bureaucratic burden on schools.
• Balance decentralisation/local autonomy and accountability to ensure that resources reach disadvantaged schools and are well spent. Decentralising educational funding to local authorities can increase responsiveness to local needs – but it may not be effective if either the funding is inadequate or local authorities lack the required capacity. Schools should keep autonomy in areas where school-level knowledge is more relevant, such as managing their personnel, while the central level should control resource levels and performance standards.
Challenge: disadvantaged schools may need additional resources
Resourcing schools involves technical complexity and political sensitivities. Students and schools have different socio-economic profiles and varying needs, and funding schemes should reflect these. While it may be recognised that differences in instructional costs need to be taken into consideration in funding allocations, there are debates about the amount of
additional funding that schools in which disadvantaged students are concentrated should receive to effectively respond to their learning needs, as reviewed in Chapter 3. According to principals’ reports, disadvantaged schools in OECD countries have lower student-teacher ratios but less experienced and qualified teachers (See Table 3.1). Since the literature on resourcing indicates that high quality teaching has a greater impact than some resource intensive practices such as smaller class sizes (Rivkin, Hanushek and Kain, 2005), it is likely that current arrangements are not optimal for disadvantaged students.
Evidence: the way resources are spent can make a difference
Research shows that providing more money to schools is not enough to improve their performance, as reviewed in Chapter 1 (Hanushek, 2003). However, the way money is allocated to schools does matter for equity. There are three main methods to determine the annual allocation of resources that schools receive:
• Administrative discretion, which is based on an individual assessment of each school. Although it can serve schools’ needs more accurately, it requires extensive knowledge of each school and measures to prevent misuse of resources. For example, bidding by submitting budget estimates encourages schools to submit inflated demands, which can lead to arbitrary cuts by funding agencies.
• Incremental costs is another type of school funding scheme, which takes into consideration the historical expenditure to calculate the allocation for the following year – but this offers no incentive for schools to reduce their expenditure or increase their efficiency. Administrative discretion and incremental costs are often combined, and usually these are used in centralised systems.
• Formula funding relies on a mathematical formula which contains a number of variables, each of which has attached to it a cash amount to determine school budgets (Levacic, 2008). In such formulas there are four main groups of variables used across OECD countries: (1) basic: student number and grade level-based, (2) needs-based, (3) curriculum or educational programme-based, (4) school characteristics-based. In general, formula funding is better at ensuring equity and can be more efficient than administrative discretion, because it avoids anomalies related to differences in bargaining power.
A well designed funding formula can be the most efficient, stable and transparent method of funding schools (Levacic, 2008). Formula funding combines both horizontal equity – schools with similar characteristics are funded at the same level and vertical equity – schools with higher needs receive higher resources. However, this type of funding may be difficult to implement and may not cover all schools’ costs (infrastructure, staff, etc). For example, funding formulae require transparency and to be sufficiently detailed and reliable data (Levacic, 2008).
After a certain threshold of expenditure, the way resources are spent is more important than the total amount spent. At the school level, more funding does not lead automatically to better results. Even in the case of disadvantaged students, quasi-experimental studies in the Netherlands showed that extra resources alone, for personnel and for computers, have not shown substantial positive effects (Oosterbeek et al, 2007). Similarly, in the case of teachers,
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it has been observed that their quality may be more important than the quantity of teachers available (OECD, 2010b).
As discussed in Chapter 1, investing in high quality early child education and care is a particularly efficient. Yet, most OECD countries under-spend on ECEC services. Countries’
investment per student is nearly 2.5 times as much for tertiary education than for ECEC and participation rates are low, particularly for disadvantaged children (OECD, 2011d).
The benefits of investing in ECEC are observed in the performance of 15-year-olds in PISA. Students who had attended pre-primary education for more than one year outperformed the rest, and in many countries the difference is equivalent to more than one school year, even when taking into account the students’ socio-economic background. There is considerable cross-country variation on the impact, which may be explained by factors such as quality. Investment in ECEC is not always enough given its potential benefits. This leads to child care shortages, low quality education, unequal access and the segregation of children according to their family income – and poorer schooling outcomes in the following stages (OECD, 2006).
Policy options for funding mechanisms to respond to the needs of schools and students Each country has its own approach to school financing, and the policy options considered are inevitably intertwined with the economics and politics of its education system.
Moreover, financing is at the crossroads of dimensions such as decentralisation, autonomy and accountability. There are several policy options to improve funding to overcome school failure and reduce dropout in OECD education systems.
Provide access to quality early childhood education and care, particularly to at-risk children In recent years, several OECD countries have made important efforts to increase access to ECEC by advancing the compulsory schooling years or increasing the number of places available for children, including Australia, Austria, Poland and Spain.10 Improving quality and funding for the 0-6-year-old educational stage is particularly important. However this sector is underfunded in OECD, and provision is usually private and unregulated (OECD, 2006). Lack of funding implies that many of the private, community or voluntary organisations are unable to support child care staff with in-service training and time to improve their pedagogical practice, so they are poorly paid and trained. In the case of children over age 3, pre-primary classes are often characterised by high child-staff ratios, teachers without early childhood certification, poor learning environments, and the scarcity of care personnel (OECD, 2006). At this initial educational stage, direct public funding of services is associated with more effective governmental monitoring of early childhood services, advantages of scale, better quality across the country, more effective training for educators and a higher degree of equity in access (OECD, 2006).
An adequate funding system should reinforce ECEC services to improve quality and foster access by disadvantaged families. Participation of the most disadvantaged will increase if adequate financial, educational and health resources are provided. Some countries have opted for a targeted approach by promoting access for disadvantaged groups. This is the case in the United States, where only 45% of 3-to-5-year-olds from low-income families are enrolled in pre-school programmes, compared to almost 75% from high-income families (Fuller et al., 2002). There are risks however: targeted programmes segregate, may stigmatise
and may fail to provide ECEC for many of the children eligible or for a large group of more moderate income families that are also unable to afford the private costs (OECD, 2006).
Take into consideration that disadvantaged students can be more costly to educate
Among the different existing funding strategies for schools, formula funding using a needs-based group of variables is most conducive to equity. In this approach students are typically the unit of measure and money follows the student if she/he moves to another school. This funding strategy allows an additional component to account for students’
supplementary educational needs relating to socio-economic disadvantage and learning difficulties (Ross and Levacic, 1999). The additional resources are meant to provide further help for pupils such as additional teaching time, specialised learning material and in some cases smaller classes. The actual variables taken into account generally depend on the availability of data,11 and difficulties can emerge with legal issues related to privacy or when there is disagreement on the selection of indicators.
If the design of finance schemes does not take into account the sometimes marked differences in the costs of students’ instruction, schools may provide lower quality education or seek alternative ways of raising money that can hinder equity. For instance, in the Czech Republic, the main reason to diagnose Roma children as “mentally retarded” was to apply for additional funds that were reserved for students with difficulties due to certain medical disabilities (Strakova, Simonova and Polechova, 2011). In an effort to reduce this misallocation of both students and funding, taking effect from the academic year 2011-2012, schools can ask for higher funding also for socio-economically disadvantaged students.
Another reason for the inappropriate diversion of resources is when local authorities do not receive enough resources overall. A study in the United Kingdom found that local governments divert school funding intended for disadvantaged students to other purposes (Sibieta, Chowdry and Muriel, 2008).12 And where authorities have differing levels of funding, those with higher fiscal capacity can supplement educational expenditures from their own tax revenues, increasing economic inequalities between jurisdictions (Chetty and Friedman, 2011). For example, in Austria and the Czech Republic there are significant differences in educational expenditures across regions (Steiner and the Styrian Association for Education and Economics, 2011; Strakova, Simonova and Polechova, 2011). As reviewed in recommendation 3 on school choice, progressive voucher schemes allow extra resources for the children and schools that need them the most. The amount can be determined according to the educational needs of the children (See Box 2.7).
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Regular school funding can be supplemented with programmes that allow governments to address specific needs. For example, in systems with large between-school variation and a concentration of low performing schools, there is a case for creating specific area-based support structures for schools. Targeted programmes can be an effective way of achieving results and represent a significant share of educational budgets in some countries. In the United Kingdom for example, starting from April 2011, schools receive an additional GBP 430 (EUR 500) a year for every student they enrol that is entitled to a free school meal (a measure of disadvantage), with schools spending this money in whatever way they judge best. Concerns about ensuring that schools actually spend the additional resources on disadvantaged students have been addressed by targeted programmes outside the funding formula accompanied by stronger accountability measures (Kendall et al, 2005, DfES and HM Treasury, 2005, Simkins, 2004).
However, an excessive reliance on supplementary programmes may generate overlap, difficulties in coordinating allocations, excessive bureaucracy, inefficiencies and lack of long term sustainability for schools. This indicates a need to rationalise programmes and simplify school funding. For example, a review of schooling in Mexico found that funding is distributed through a large number of programmes and recommended they be rationalised in
Box 2.7. Weighted student funding schemes in the Netherlands and Chile
Formula funding with additional weights for disadvantaged students was adopted in the Netherlands for all primary schools in 1985. Schools with substantial numbers of weighted students receive more funds. Although the level of funding for each school is determined by the needs of individual students, there is no requirement that schools use these extra resources directly on these students. Schools can for example choose to reduce the number of students per class. The “weight”
of each student is determined by the parents’ educational level. Empirical research conducted by Ladd and Fiske (2009) studying the Dutch funding system show that these mechanisms have succeeded in distributing differentiated resources to schools according to their different needs:
primary schools with a high proportion of weighted students have on average about 58% more teachers per student, and also more support staff.
In Chile, a voucher system was initially introduced with equal weights for all students; research indicates that it significantly increased segregation between schools (Elacqua, 2009; Hsieh and Urquiola, 2006). In 2008, a weighted voucher scheme was adopted, to provide more resources for students from low socio-economic background and additional support to schools where disadvantaged students are concentrated. The value of the voucher is 50% higher for students from low socio-economic backgrounds and for indigenous children, and in 2011 the voucher has been increased 21% for the most disadvantaged students (approximately 40% of the recipients). In addition to the supplementary money linked to students and schools, there is a quality assurance system including improvement plans for schools that want to accept this voucher (See Box 2.9).
Top-up payments by parents of students that are not considered disadvantaged are allowed in publicly subsidised private schools. Elacqua (2009) analyses the impact of the weighted voucher and finds preliminary evidence that it can mitigate the segregation effects induced by universal vouchers.
Sources: Ladd H., Fiske E. and N. Ruijs (2009), “Parental Choice in the Netherlands: Growing Concerns about Segregation”, Prepared for School Choice and School Improvement: Research in State, District and Community Contexts, Vanderbilt University, October 2009; Elacqua G. (2009), “The impact of school choice and public policy on segregation: Evidence from Chile”, Centro de Politicas Comparadas de Educacion, Universidad Diego Portales, Santiago, Chile; Hsieh C. and Urquiola M. (2006), "The effects of generalized school choice on achievement and stratification: Evidence from Chile's voucher program," Journal of Public Economics, Elsevier, vol. 90.
order to distribute resources more efficiently, clearly and equitably; as well as to avoid the additional bureaucratic burden on schools (OECD, 2010d). In addition, these programmes are often short term, and do not enable schools to have sustainable approaches to support disadvantaged students.
In the Netherlands a programme is being designed to pull together the resources of different educational stakeholders in the South of Rotterdam, the most deprived area of the country.13 Box 2.8 gives additional examples from France and Greece.
Box 2.8. The French and Greek experience of creating special educational areas In France, special educational areas date back to 1981 and were initially conceived to promote new educational projects and partnerships with local stakeholders in order to increase academic performance (Bénabou, Kramarz and Prost, 2009). A hallmark of area-based support was the Zones d’Éducation Prioritaire (ZEP, “Priority Education Zones”), which involved 15% of students in primary and lower secondary schools in more than 800 areas. The additional resources were mainly aimed at reducing class sizes and giving incentives to teachers and extra funding to the schools, enabling them to provide supplementary hours of instruction. Schools had discretion on resource allocation. Comprehensive evaluations pointed to the need for improvement (O’Brien, 2007;
Bénabou, Kramarz and Prost, 2009). The additional resources had a very limited impact on academic performance. The quality of teachers decreased as salary bonuses are insufficient to attract more experienced teachers, and accelerated career incentives resulted in higher turnover. The socio-economic composition of ZEP schools worsened and attending these schools led to stigmatisation.
The results showed the need to concentrate more resources on fewer schools. In the school year 2006-2007, the existing networks were replaced by two networks to differentiate by levels of need:
Réseaux de Réussite Scolaire (RRS, “Networks of School Success”) which include around 14% of students in compulsory schooling; and Réseaux d’Ambition Réussite (RAR, “Networks of Ambition Success”) which are confined to the most disadvantaged schools. The RAR represents expenditure per student 16% higher than the average. RAR schools receive additional funding mainly for supplementary teachers (90%) and bonuses (8%). In the school year 2010-2011 a new programme has been implemented aiming at spreading innovations in pedagogy, school life and human resources, and providing a safer environment (Moisan, 2011).
In Greece, a new policy initiative currently underway establishes Zones of Educational Priority (ZEP). This policy shifts the focus from targeting designated populations (Roma, immigrants and Muslim minority) to targeting whole areas. In particular, it aims to broaden the scope to include disadvantaged schools within poor regions, thereby focusing attention on disadvantaged schools and disadvantaged students. ZEP pulls together resources to tackle social and regional inequities, enabling a broadened perspective of their causes. ZEP areas are identified using social and educational indicators, aiming at all pre-primary, primary and secondary schools in need of support.
Support is not limited to students and schools, but also targets parents, so it relies on co-operation between the Ministry of Education and other ministries (employment, justice). Therefore, the ZEP emerges as a horizontal network of educational and social policy actions in regions experiencing multiple deprivation (Greek Ministry of Education, forthcoming).
Sources: Bénabou, R., F. Kramarz and C. Prost (2009), “The French Zones d’Education Prioritaires: Much Ado about Nothing?” Economics of Education Review, Vol. 28, No. 3, pp. 345-356; O'Brien, P. (2007), "Enhancing Incentives to Improve Performance in the Education System in France", OECD Economics Department Working Papers, No. 570; Moisan, C. (2011), Comment en finir avec l’échec scolaire: les mesures efficaces, Projet de rapport national de base de la France. www.oecd.org/edu/equity; Greek Ministry of Education (2011), Overcoming School Failure: Policies that Work, National Report Greece. www.oecd.org/edu/equity
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Balance autonomy with resource accountability to ensure resources reach those with the greatest needs
While funding strategies of schools in OECD countries differ, the responsibility for allocating resources is generally linked to the degree of autonomy and accountability in school systems. The degree of decentralisation of educational funding is linked to the responsiveness of local authorities to local needs. However, decentralisation may not be effective if local authorities lack the capacity and/or funding is inadequate. Local authorities should be familiar with appropriate standards of provision. Jakubowski and Topinska (2009), studying the educational decentralisation to local governments in Poland, conclude that local governments lack expertise in the area of teaching, and if they follow the advice of local teachers, there is a bias to teacher group interests rather than the interests of the education system as a whole.
Since the 1980s, school reforms in several OECD countries have increasingly given schools greater autonomy, in an effort to increase performance (OECD, 2010b). On average, 81% of school principals in OECD countries can decide on budget allocations within their school; school autonomy is greatest in the Netherlands, the Czech Republic. The relationship
Since the 1980s, school reforms in several OECD countries have increasingly given schools greater autonomy, in an effort to increase performance (OECD, 2010b). On average, 81% of school principals in OECD countries can decide on budget allocations within their school; school autonomy is greatest in the Netherlands, the Czech Republic. The relationship